Arnold Lets Workers' Comp Insurers Off The Hook

by Doug Heller and Jamie Court

In the workers' compensation reforms Arnold introduced today, insurance companies drew a "get-out-of-reform-free" card from the community chest. Arnold's proposal, known as AB 1, greatly reduces penalties against insurers that pay workers' benefits late and provides no regulation of the premiums workers' comp insurers charge businesses, despite California's successful history with strong premium regulation of auto, homeowners,commercial and most other insurance under Proposition 103.

Arnold's 150 page bill, pledged to relieve businesses of exorbitant workers' comp costs, regulates just about everybody involved in the system, except the insurers even though AIG, the largest private workers comp insurer in the state, reported 3rd quarter 2003 profits up 27%. (Of course, AIG also reported a $100,000 contribution last week to Schwarzenegger's Total Recall campaign.)

Under Prop 103's insurance regulation auto insurance premiums dropped 22% in California while the rest of the nation's premiums went up 30%. But California workers' comp premiums -- deregulated in 1993 -- have skyrocketed in these years without insurance regulation. Ironically, Arnold's free pass for insurers will cost all other California businesses a lot more than monopoly money.